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Tuesday, 21 May 2013

Does it take two to tango to get win-win negotiation outcomes?

Negotiation training has been shown to lead to positive outcomes for parties on both sides of the table, identifying 'win-win' solutions and helping the wheels of the world turn more amicably. But many studies focus on consequences when both negotiators are trained using the same methodology, when the reality is that a counterpart from another organisation may be trained differently or not at all. What happens then? A study by Alfred Zerres and colleagues finds out.

The study recruited 360 business administration students as either a 'buyer' or 'seller' and gave each some information on the context to study. Participants then conducted an initial negotiation over computer chat with a counterpart (a buyer to their seller), each trying to achieve their assigned objectives. Pair performance was measured by combining the success of buyer and seller: the negotiation was designed to be non-zero-sum as some factors were framed as more valuable to the buyer than seller, and vice versa, making some settlements more 'efficient' or mutually attractive than others. For this first negotiation, pair performance was fairly inefficient, on average reaching just 61% of the best outcome for both parties.

After this, some participants were kept busy with a filler task, whilst others received negotiation training. The training introduced the idea of 'logrolling', trading factors that mean more to the person receiving than the one giving, epitomised by two children fighting over an orange when one is most interested in the juice and the other the peel. Trainees then had opportunities to work through an example and then try and extend the concept to some other cases.

After this session, all pairs reconvened for a second negotiation on a separate issue. In some cases both parties had received training, and their pair performance was significantly better. What about when just one party had been trained? They did just as well – but only if it was the seller who had gotten training. Seeking a causal mechanism behind this, the researchers had recorded the computer-chat negotiation interactions, and looked at the amount of active information exchange in each pair, specifically sharing their own priorities or asking the counterpart about theirs. This kind of information sharing is crucial for logrolling, and analysis confirmed that this was behind the better performance by pairs with a trained seller. In a third negotiation one month later, groups with a trained seller both were better at spotting logrolling opportunities but also at recognising entirely compatible factors such as a buyer wanting quick delivery and a seller wanting to clear their warehouse rapidly.

The buyer role in a negotiation is about loss-aversion (not being suckered into a bad purchase) which encourages a vigilant but passive stance - 'convince me!' - putting the onus on the seller to push and shape the conversation. If the seller is focused on log-rolling, then that conversation will be more transparent and lead to better outcomes. In some cases, a purchasing organisation might benefit more by identifying vendors that are trained in (virtuous, win-win) negotiation techniques than to invest in training their own buyers. Alternatively, organisations who do train buyers might want to go beyond providing new concepts and investigate whether changing motivational mindset could lead to better outcomes in negotiations that matter.